Tracfone Ups Prepaid Stakes with Simple Mobile Buy

Tracfone Wireless is acquiring Simple Mobile in a deal that could help it kick off a SIM-only service to the U.S. market. Simple Mobile has more than 1 million customers and runs on a SIM-only model - it doesn't sell phones, but instead sells prepaid SIM cards that can be used to activate about 200 different GSM phones including the iPhone. It claims to be T-Mobile USA's largest MVNO. America Movil, Tracfone's Mexico-based parent company, issued few details about the transaction in its announcement Thursday. It did not disclose how much it is paying for Simple Mobile, but said it expected the deal to close this quarter. The acquisition is "likely the first step in a broadening strategy," BTIG Research Analyst Walter Piecyk said in a research note. "The move comes at an opportune time as unlimited pre-paid operators Leap Wireless and MetroPCS are struggling with the rapidly rising costs of smartphone subsidies and post-paid operators are cracking down on their previously liberal upgrade policies." Piecyk pointed out that other CDMA prepaid providers like Cricket, MetroPCS, Boost Mobile and Virgin Mobile USA are precluded from competing with their own SIM-only service since CDMA phones doesn't use SIM cards. H20 Wireless, an AT&T MVNO, also offers SIM-only service but its plans are less competitive than Simple Mobile's. Tracone, a U.S. subsidiary of Mexico's America Movil, claims to be the largest prepaid provider in the country with 19.8 million subscribers. It sells prepaid wireless debit cards and low-cost handsets at gas stations, big box stores, pharmacies and other retailers. The Simple Mobile announcement came just days after America Movil made a bid for Dutch wireless provider Royal KPN NV. America Movil is owned by Carlos Slim, ranked by Forbes as the world's richest man with a net worth of $69 billion as of March 2012. The Mexican government fined the telecommunications giant $1 billion last year for monopolistic practices, but revoked the penalty this week.